Utz Brands Inc: Maximize Income with Covered Call Strategy
Shareholders of Utz Brands Inc (Symbol: UTZ) seeking to enhance their income beyond the stock’s 1.8% annualized dividend yield might consider selling a June covered call at the $15 strike price. This strategy allows investors to collect a premium of 85 cents, which annualizes to an additional 20.5% rate of return based on the current stock price. When combined with the dividend yield, this could lead to a total of 22.3% annualized return if the stock is not called away. However, if the stock’s price exceeds $15, any upside above that point would be forfeited. For this to happen, UTZ shares would need to increase by 8% from the current levels. Thus, if the stock is called, shareholders would still enjoy a 14.1% return from their trading position plus any dividends received beforehand.
Generally, dividend amounts can fluctuate and often reflect a company’s profitability. For Utz Brands Inc., examining the dividend history chart below can provide insights into whether the recent dividend is sustainable, thereby setting expectations for the 1.8% annualized dividend yield.
Below is a chart depicting UTZ’s trailing twelve-month trading history, with the $15 strike price highlighted in red:
Using the chart along with the stock’s historical volatility can assist in assessing whether selling the June covered call at the $15 strike offers an adequate reward for the risk taken by capping the potential gains beyond this price. (Learn about common options myths.) The trailing twelve-month volatility for Utz Brands Inc is calculated at 32%, based on the past 249 trading days, alongside today’s price of $13.87. For more ideas on call option contracts at various expirations, please visit the UTZ Stock Options page on StockOptionsChannel.com.
In mid-afternoon trading on Monday, S&P 500 components logged a put volume of 1.08 million contracts and a call volume of 1.80 million contracts, resulting in a put-to-call ratio of 0.60 for the day. This figure indicates a higher preference for calls compared to the long-term median put-to-call ratio of 0.65, suggesting that buyers are more inclined toward calls in today’s options trading.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
